MA Superior Court Wage Act Decision – Turning Precedent on its Head?

A Massachusetts Superior Court recently ruled that a car dealership that paid employee-mechanics an hourly rate while working on customer vehicles, but did not compensate them for time spent on related tasks, such as cleaning their workspace, maintaining tools, dealing with customers and coworkers or completing paperwork, did not violate the Massachusetts Wage Act.

It is unlikely that employers can rely on this ruling in creating compensation structures for employees because:

(a) it is highly fact specific,

(b) is only a superior court decision, and

(c) there is quite a bit of caselaw that suggests this decision is an outlier.

However, employers have been hammered by the Massachusetts Wage Act for over a decade now, and this decision could signal a swing of the pendulum in the other direction. Nevertheless, if there is a takeaway from this case, it is that employers will need to:

ensure that any arrangement between employer and employee as to compensation for work performed is clearly agreed upon in writing and signed by the employee; and

closely monitor the amount of time non-exempt workers spend on tasks related to their employment but for they are not directly compensated, to avoid running afoul of minimum wage and overtime requirements.

The judge reasoned that in an employment contract, if both the employer and employee agree that the employee will be paid an hourly rate for selected tasks, but not for all work , it does NOT violate the MA Wage Act.

In allowing the car dealership’s motion to dismiss, the Court wrote:

“[A]n employer and employee who agree at the outset of their contract that the employee will be paid at an hourly rate for selected tasks, but not for all work, are plainly not violating the Wage Act when the employee is paid in accordance with this agreed understanding…[A]n employer who pays an employee as he has agreed to be compensated — provided (as here) that it complies with all applicable minimum wage and overtime laws — has fulfilled the core aspiration of this statute.”

The Plaintiff argued that the courts reliance on the fact that the mechanics understood the arrangement is contrary to the Wage Act itself, which specifically prohibits employers from entering into a special contract to avoid their obligations to pay employees’ wages.

The Defendant claimed the pay arrangement was more like a flat-rate basis or commission/incentive basis, as each job he was given was assigned a certain number of hours for which the customer was charged and for which the employee was paid an hourly rate of $26 — regardless of how long the job took. The employee was guaranteed at least a flat rate of pay for 40 hours a week, or a minimum of $1040, even in a slow week in which the employee logged only 20 or 30 hours.

The Wage Act sets forth no specific method by which employees are paid their earned wages and does not require that employees in all circumstances be separately paid for each and every hour they work. An employer is subject to compliance with minimum wage and overtime laws, and the Wage Act required no more than that employees be timely paid and in accordance with the terms of the agreement with their employers.

The Judge determined that the fundamental flaw in the reasoning underlying the plaintiffs claim was the distinction between a situation in which an employer actually required an employee to work “off the clock” and one in which an employer and employee agree that the employee will be paid hourly for certain tasks but not for others.

The Court wrote:

“It is, of course, true that a private contract between employer and employee to pay less than minimum wage, withhold due overtime, deduct property damage from paychecks, or disburse wages less frequently than required by law would be entitled to no effect, and would certainly not estop the employee from enforcing such laws…But…the essential feature [of the Wage Act] at issue in this case is the legal mandate that employers honor the promises they have made to employees by paying them the agreed compensation they have ‘earned’ for their work. Fulfilling the parties’ contractual understanding cannot logically be considered a circumvention of the Wage Act’s requirement that employees be paid the wages they have earned.”

If you employ workers paid an hourly wage or independent contractors, and would like legal assistance to develop a compensation structure that complies with the Massachusetts Wage Act, please do not hesitate to contact the Boston Business {Attorneys, Lawyers} at The Jacobs Law LLC at 1-800-652-4783 or email ContactUs@TheJacobsLaw.com.

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